BUFFALO, NY (WKBW/BBB) - The new rules on limits to credit card interest rate increases and penalty fees are mostly good news for consumers according to the Better Business Bureau (BBB), but consumers must remain cautious. The Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 mandated major changes for the credit card industry. Some changes occurred on February 22. Another round takes effect this Sunday, August 22, 2010.
The new rules limit penalties for paying your bill late and eliminate fees for not using your card. They also prohibit credit card companies from charging you more than one fee for a single event or transaction that violates your cardholder agreement.
“If you pay your bills on time, you probably don’t worry about late fees but so many of us miss those deadlines,” said David Polino, Better Business Bureau President. “Many households are still struggling to make ends meet. Granted there’s a lot of good news from the new credit card act, but if you miss a payment or go over your credit limit, you’ll still get hit with extra fees. They may be more reasonable fees however it’s still more cash out of your pocket so the best policy may be to pay on time.”
BBB offers some of the new credit card rules taking effect Sunday according to the Federal Reserve Board are:
- Reasonable late-payment penalty fees. In the past you paid the same late fee whether your minimum required payment was small or large. The new rule says that your credit card company can’t charge you more than $25 for a late payment unless you’ve been late on one of your last six previous payments, in which case it can increase the fee to $35. The company can’t charge you a late payment fee that’s more than the minimum payment you owe. So if your minimum payment is only $10 this month, $10 is all the company can charge you as a late fee.
- No inactivity fees. Credit card companies no longer can charge a fee for not using your card enough.
- One-fee limit. You can’t be charged more than one penalty fee for the same transaction.
- Explanation of rate increase. If your credit card company increases the Annual Percentage Rate (APR) it charges you, it has to tell you why.
- Re-evaluation of rate increases. If your credit card company does increase your APR, it has to re-evaluate that rate increase every six months. If it decides to lower your rate based on that evaluation, it has to do so within 45 days after completing the evaluation.
The rules that took effect in February required credit card companies to give you 45 days notice for interest rate changes and gave you the ability to opt out of changes and pay off your balance over five years. The rules also put restrictions on credit cards for persons under 21 years’ old and required companies to eliminate double billing cycles. More information about the new credit card rules taking effect on Sunday can be viewed here at the Federal Reserve Board web site.